Business leaders denounced a Foreign Office decision to shut the UK’s
consulate in Basra, Iraq’s economic capital and the heartland of an emerging
oil boom.

William Hague, the Foreign Secretary, said that cutting a permanent presence in Basra would save £6.5m.

Foreign Office officials said the closure was part of a “reconfiguration” that would expand Britain’s diplomatic network in Iraq and deliver more effective coverage of Iraq’s expanding business base. The decision was taken after extensive consultation with leading businesses.

Alistair Burt, minister for the Middle East, said businesses would get a better standard of support from UK officials in Basra and other parts of Iraq. “Our team in Baghdad will do the job in Basra that needs to be done. It’s a very important area for us with the oil fields, with the potential for infrastructure development. We’re already doing well with contracts there,” he said.

However, there was a furious reaction from business leaders, who said that British investment amounted to $1bn (£620m), far behind a figure of $12bn invested by the Chinese.

“I think this is a foolish short-term thing, but I don’t think that’s a Foreign Office decision. I think it is something that is done from the Treasury,” said Baroness Nicholson of Winterburn, chairman of the Iraq Britain Business Council.

Maj Gen Jonathan Shaw, who commanded British forces in the bloodiest period of the five-year operation following its liberation from Saddam Hussein’s rule, said: “To withdraw now is insane. One of the great benefits for our involvement there through the war was to get some future business.

“There is no strategy about this decision, it was forced by cuts. It’s a triumph of the accountants over joined-up government.”

Mr Hague said Britain would expand its diplomatic presence across the whole of Iraq with the money saved from shutting the consulate.